IBM Chairman Defends Stance on Dividends : Investment: Stock gains said more important than higher shareholder compensation.
IBM Chairman Louis V. Gerstner Jr., presiding over his third annual shareholder meeting Tuesday, defended a decision not to raise dividends despite the leading computer company’s rebounding fortunes.
Just before the meeting, IBM’s directors again voted to hold its quarterly dividend at 25 cents a share, provoking a groan from many shareholders when the decision was announced.
Several expressed dismay that shareholders were not reaping more from IBM’s rebound.
After a $3.02-billion profit for 1994, IBM last week posted first-quarter earnings of $1.29 billion, its best performance ever for the first three months of the year.
A shareholder who suggested the board consider a dividend increase at their next meeting was strongly applauded.
But Gerstner said the dividend was just one measure of the company’s return to investors. He noted the company’s stock, which hit a low of $41 in August, 1993, was trading above $90 this week.
“Having the stock go up is much more important than a nominal increase in the dividend,” Gerstner said.
Although the discussion was mildly heated, it still contrasted sharply with the prior two annual meetings run by Gerstner, when the shareholder complaints concerned IBM’s losses.
The audience Tuesday was sprinkled with retirees, owing in part to the meeting’s setting in a Sun Belt city and their reliance on stock dividends for income.
“You can say you should be able to sell the stock for more than you could a few years ago, but I would prefer to have the stock in my estate and have the dividends,” said Andy Amundson of Easley, S.C., who retired from IBM eight years ago and has owned its stock for 40 years.
The dividend was less important to shareholder Sandy Kovacic, a young mother and homemaker from Charlotte. She started acquiring IBM stock when it exceeded $100 a share and is eager to recover her initial investment.
“I’m happy with the progress of the price,” she said. “But we have a while more to gain. Eventually we’ll get our money back from it.”
Responding to other questions, Gerstner defended the company’s decision last year to consolidate its advertising with one firm and repeated past statements its large job cuts are over.
One shareholder, expressing concern over IBM’s commitment to its OS-2 personal computer operating software, asked whether he should buy its new version called Warp or wait for Microsoft Corp.’s Windows 95.
In reply, Gerstner took a shot at Microsoft, which has repeatedly delayed the product: “You should clearly buy OS-2 Warp. . . . We cannot talk about Windows 96. We haven’t seen it.”
In his speech, Gerstner said the world’s biggest computer company’s leadership in the industry no longer means promising more than one can deliver.
